Bank of America strategists do not believe in the stock market rally in July and believe that the point is approaching where it will be time to sell. The S&P 500 is up 7.6% this month as bond yields have fallen, corporate earnings haven’t been as bad as feared and enthusiasm has grown that the Federal Reserve needn’t be so tight. aggressive going forward in its efforts to pull down. inflation But BofA’s equity team warned Thursday that more trouble could be ahead. “We still believe this is a bearish rally,” Michael Hartnett, the bank’s chief investment strategist, said in his weekly “Flow Show” report that looks at where money is flowing through financial markets. Hartnett said it “makes sense” that with government bond yields falling, stocks are rising, as rising yields amid escalating inflation fears were a major catalyst in sending stocks to a temporary bear market. However, he warned that things could change “once the labor market turns recessionary” and bonds could once again outperform stocks. Weekly jobless claims have risen steadily, and economists generally expect payroll gains to begin to decline. Hartnett said he would “fade out” any S&P 500 level above 4,200, which is 3.1% above Thursday’s close. I would be a buyer if the index falls below the “true lows” of 3,600, or 11.6% below Thursday’s level. Investors have been buying the recent rally. Inflows into US stock funds totaled $9.5 billion last week, the highest total in six weeks, according to Bank of America data. High-yield bond funds rallied $4.8 billion in the week, the best gain in 21 months.
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